Archive for June, 2010

People Were Right: The Next Round of Default Will Be Student Loans

 

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 I have had a few conversations with other ‘educated’ people in different fields regarding student loans. It’s pretty much the same: I’ve been paying for this amount of time, payments don’t make a dent, I am using up all of my deferments and forbearance and the balance keeps growing, and I or my spouse is unemployed. Looking at this article, it sounds like SLM operates its business identical to the housing market:  

Student Loan Corp. Plans to Issue $855 Million of Asset-Backed Securities – BloombergJune 29 (Bloomberg) — Student Loan Corp., the lender majority-owned by Citigroup Inc., plans to sell $855 million of asset-backed securities, according to a person familiar with the offering. 

The loans are guaranteed by the U.S. government, said the person, who declined to be identified because the terms aren’t public. Bank of America Corp. is also selling $1.23 billion of bonds backed by government-guaranteed student loans. SLM Corp., known as Sallie Mae, is marketing a $1.7 billion offering tied to private loans, or those that don’t carry the guarantee, a person familiar with that offering said. 

This year, $8 billion of asset-backed securities tied to student loans have been sold, compared with $10.4 billion during the same period in 2009, according to data compiled by Bloomberg. Sallie Mae hasn’t issued debt linked to private student loans, which is harder to sell because it lacks a government guarantee, since the Federal Reserve ended its program to thaw credit markets in March. 

It’s usual business practice to sell off high risk, potential bad debts or debts the lender perceives he won’t get payment on. It’s kind of like the sinking ship, when people are throwing off the heavy load, but as it’s still sinking they think throwing off ropes, socks and buckets will keep it afloat; it will for a short extended period of time. Unless the actual hole in the boat is fixed, it’s going under. OR… 

I wonder if SLM selling those securities to a company it will later buy? So if these are considered high risks, sell them to another company and let them have those debts as part of their assets, then buy them back or buy the actual company which is holding the debts. Similar to when debtor consolidate your loans with one company and leave SLM, SLM buys that company and though you have a consolidated loan, SLM has you back into her economic grip (I have personal knowledge of this) 

Look at the description of the bonds, sounds like securities sold with the promise that the individual will be in debt forever so whoever buys will have a recurring revenue stream upheld by the ‘educated’, unemployed who purchased a bad bill of goods. 

Also being marketed this week is a $650 million sale backed by auto loans from Richmond, Virginia-based CarMax Inc. World Financial Network Bank is issuing $450 million of bonds backed by credit-card payments, and a leasing unit of Sydney-based Macquarie Group Ltd. is selling $500 million of securities backed by auto leases from Australia. 

Whether it be mortgages, home equity loans, student loans, car loans or credit cards, these corporations are literally banking on the fact that the consumer is willing to incur debt with exhorbitant interest. While you struggle to make payments, your debt is repackaged into a new ‘product’ for others to “invest” and have a slice of the interest pie, with their second homes and yachts…this is very interesting. 

p.s.: Here’s some news about Sallie Mae from this past month:  

Starting this summer, Uncle Sam will be your banker for federal student loans: Families can expect a streamlined process and some other perks: May 30, 2010, http://articles.baltimoresun.com/2010-05-30/business/bs-bz-ambrose-student-loans-20100530_1_federal-student-loans-direct-lending-parent-loan 

Woohoo, it just gets better! This article was published in the New York Times on May 28, 2010: Placing the Blame as Students Are Buried in Debt [http://www.nytimes.com/2010/05/29/your-money/student-loans/29money.html?pagewanted=1&ref=business&src=me ] 

UPDATE:Sallie Mae ‘Interested In Exploring’ Citi’s Student Loan Ops, May 19, 2010, http://online.wsj.com/article/BT-CO-20100519-711314.html?mod=WSJ_latestheadlines 

Sallie Mae sells center to Aegis “saving jobs”: http://www.businessweek.com/ap/financialnews/D9FPF5H81.htm 

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Is China America’s Mirror?: Newsweek: Smart, Young, and Broke: White-Collar Workers are China’s Newest Underclass

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Melinda Liu and Marjie Vlaskamp, p. 40, June 28 & July 5, 2010; online version: China’s New Underclass: White-Collar Workers – NewsweekAnd you thought it was bad here. Must we wonder why globalization may not be such a good idea? Because when a bunch of countries jump on a bandwagon, say the proliferation of higher education, there’s little to no room for recovery, and no I’m not referring to fleeing to another country, well not necessarily!

“Guo and an estimated million others like him represent and unprecedented and troublesome development in China: a fast-growing white-collar underclass. Since the ‘90s, Chinese universities have doubled their admissions, far outpacing the job market for college grads.” [emphasis mine] My word, does this sound familiar? I know these blogs are dedicated to the law school (graduate level) industry, but I am sure that American undergraduate universities have been doing the same thing. I’ve read commentators and some bloggers suggest leaving the U.S., should you be that desparate—choose wisely!

I wonder if the author’s been reading these blogs, then again just the sad, universal reality of university systems here and abroad:  This year China’s universities and tech institutes churned out roughly 6.3 million graduates.  Many grew up in impoverished rural towns and villages and attended second- or third-tier schools in provinces, trusting that studying hard would bring them better lives than their parents had.  Interesting, we see that the promise of upward mobility is not only promoted here as the American Dream, but in other countries for hope as well. I wonder how their medical and legal fields are doing?

They may be smart and energetic, but some are starting to ask if the promise of a better life was a lie. If you have to ask, then you likely know the answer.

They’re known as “ants,” for their willingness to work, their dirt-poor living conditions, and the seeming futility of their efforts.  “These ants have high ambitions but virtually no practical skills”…

The similarities between those Chinese graduates in the tech field and American law graduates is simply astonishing. It’s a potentially explosive situation. It sure is. Just imagine how many millions of unemployed, educated persons who were deluded will lose patience with the current trend. Someone commented before about potential riots and living near concentrated urban areas.

The discontent rising among the ants is even more worrying. Blue-collar wages have actually soared recently, while white-collar pay is shrinking. This resonates so deeply right now I’m confident we can superimpose attorney with computer programmer and change the geographic region and we will have a sufficient description of the American legal industry.

…the government admits that at least one in eight is permanently unemployed. And those who get jobs don’t always find work in their chosen fields. Ditto. College grads have far higher expectations than the migrant laborers who have fueled China’s growth for three decades.  “Ants are educated. They speak foreign languages. They’re Internet-savvy.  It’s that potential for trouble that has the government worried,” he says.  “If they aren’t satisfied with their living conditions and want to start a movement, like the 1989 Tiananmen Square protests, it becomes a huge problem.”

This is an interesting take, the Chinese government is concerned about the educated persons becoming unruly. In a way it makes sense. People who lived in poverty most of their lives and chose not to attain higher education and debt are accustomed to a lower standard of living. Those who work hard, with aspirations of attaining a “better life” are crudely disappointed with the all-encompassing economic reality. Thus, the former, really did not have any thing to lose, while the latter has invested time, money, effort and sacrificed aspects of normal social living based on societal and other assurances that it will be compensated for upon completion. Very interesting. Though it’s not simply black and white, of course there will be poor people who are willing to cause harm and take what’s not theirs, but I think this article shed some light (at least for me) on how we compartmentalize (poor vs. middle class or wealthy, educated vs. uneducated, etc) but the variables may cross depending on the circumstances.

This guy gives some ideas on how an uprising would occur. Is it just me or do governments tend to look at suppressing uprisings, stemming tides of frustration but oft-times do not offer or work with those affected to create solutions to the circumstances that originated the frustrations?

The ants don’t seem to be organizing in any big way so far. But they clearly have the necessary technical skills and a sense of common backgrounds and objectives.  “it’s like I’ve joined an army,” says Wang Lei, a young University of Innder Mongolia graduate who has found steady work as a computer programmer after months o searching.  “For the rest of my life, I’ll meet former Tanjialing inhabitants and have strong ties with them because of our shared experience.” Comments like this make China’s leaders nervous, not least because the ant tribes are so fluid and difficult to monitor.  If they were somehow to make common cause with other restive rural-born Chinese, such as landless farmers or migrant workers, they’d be extremely hard to suppress.”

This wouldn’t happen in America, we’re too individualistic, judge people by their clothes and there’s too much racism and haves vs. have-nots. In China, although there are ethnic Chinese and others, they’re more homogenous than Americans. So, it’s not just bad here for educated folks, just look around you.

A New Way to Discriminate: Latest Trends in Employment Ads and its Effects on Black Americans

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Yes, this is controversial and since this particular manner of advertising for vacancies is an emerging trend I won’t deny this post may not be totally accurate. Recently, another blog posted an article from CNN Money concerning those who are unemployed aren’t desired as potential candidates for a particular vacancy. Here’s the original article: Out-of-work job applicants told unemployed need not apply – Jun. 16, 2010. Yahoo decided to further expand on the issue here:

2010 Unemployment Extension Jobless Woes: Unemployed Need Not Apply – Associated Content – associatedcontent.com The first portion which seems to draw fire to the hiring practice is:

“It may seem as discriminatory as “Blacks Need Not Apply” or “Women Need Not Apply” or “Irish Need Not Apply”” — and it is, but in a more general and less inflammatory sense — but it is commonly used, blatantly printed in online and newsprint ads and classified sections. Instead of discriminating via age, gender, race, or ethnicity, businesses discriminate on whether or not you’re currently employed.” [emphasis mine] Hmm, you don’t say? First, let’s disband comparing Irish to Blacks. Although Irish had difficulty when first arriving to the U.S. years and years ago, they were eventually “Anglos-ized” into the broader “white” category as with other Americans who were descendants from other European countries. This was, is not and will never be the case for Blacks.  The other interesting part is where the author states: “more general and less inflammatory.” However, the author makes it appears that using the filter “Unemployed Need Not Apply” is better than saying outright “Blacks Need Not Apply” or rather those old Jim Crow signs “No n******, no jews, no dogs” though it has the same economic impact.  Since the highest percentage of the unemployed in the U.S. are Black Americans, with an overall unemployment rate remaining steady at 25% towering above the national average with no apparent signs of decreasing.  You’re right it is not as inflammatory, just more insidious.

Although some in the employment sector argue that these employers crafted these vacancies because of suspicion of performance issues, I think many of us in the legal industry would like to have more information. Since most attorneys work contractually (general counsel, staff attorney, direct hire, contract attorneys) and many positions are at will or short term, this line of reasoning doesn’t seem to be applicable for these types of cases.

Anyway, we all know that discrimination which has a disparate impact on a suspect class is subject to strict scrutiny. One is unable to argue that the applicant was not qualified because his or her application/resume would not even be considered for review because the applicant is already unemployed.

I am not dismissing the fact that some whites and others have been affected by the economy especially unemployment but what I am referring to are those who are the most affected are also a minority and thus a ‘suspect class’ (p.s. have you ever wondered why “suspect” was the designated term, just saying).

So, now we have the highest percentage of unemployed in America who are black, who will be unable to qualify for jobs, not because of lack of experience, job skills, or education but because they are unemployed. Between the employment practices in the current economy and the current Congressional stalemate  regarding unemployment compensation it is becoming apparent that Blacks are put in the game of “can’t win for losing.”

The practice contributes to the jobless rate that the U. S. Department of Labor places at 9.7% of the workforce (although some estimate that the number is closer to 22%). The estimate is that 15 million Americans are unemployed, most due to no fault of their own. Many have exhausted their benefits, their life’s savings, taken part-time and lesser paying jobs to help make ends meet. [emphasis mine] Yet, they are punished for actually wanting to get back on their feet, wanting to live as a decent man and woman by working and earning a quality living; yet are thrown in the perpetual cycle in which the onlookers gawk and “blame” them for taking handouts, though what they did receive in benefits does not cover most of the basic necessities…

As the jobless find their income options becoming increasingly limited, such as those hoping for Congress to pass the 2010 Unemployment Extension Bill, they also see that job openings are being filled by passive job seekers, the term recruiting companies use to label those already employed looking for a job. The jobless are being actively marginalized by the job market itself. So this country has given up on those who desire work and recycles those in one job into another, increasing the lack of skills of the former as well as unemployment gap on their resume while the already employed continue to gain more and more experience and continue to be favored while the former is unable to get the job experience in the first place because jobs won’t hire him or her for being employed in the first place. We call this a country of democratic ideals.

For the millions of unemployed attempting to find a job, the business practice of not hiring the jobless may only reinforce what they had already suspected. Not being able to find a job leads to its own special mental state of paranoia and seeming besiegement by forces beyond one’s control. Regardless, the news cannot be anything but discouraging…Many of the unemployed, who found themselves in that state due to no fault of their own, are finding that they are remaining in a jobless state through no fault of their own. It is a number that, in accordance with the “growing trend” to openly and secretly discriminate against the unemployed, may not see much of a decrease for some time. In other words, it’s not fair, it’s not likely to change as the private sector pretty much runs the country. At least we can realistically prepare–for the worse.

Another Field Looking to Exploit Desperate, New Law Graduates

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An interesting article, amidst the shrinking legal market, financial firms believe their business will increase by offering similar services to law firms: Look to law grads for recruits, June 24, 2010 

IFAs should look to law graduates as a source of new recruits, according to Sifa. Speaking on board PIMS last week, Sifa development director David Seager said there are few jobs at present for law graduates and financial services firms should look at recruiting them into the IFA profession. Wait, you want to get businesses to hire law graduates who took upon themselves $100,000+ in non-dischargeable debt to fill positions of financial advisors

He said: “There are a lot of people studying law but there are very few jobs. We always have this debate in financial services about where the new blood will come from. Firms should start looking at law graduates.” [emphasis mine] O.k., let’s clarify, yes many students study law, common law, theories, unrealistic hypotheticals which garner no practical legal skills. Unless that law graduate has an MBA or you’re willing to train them on finance, you may be making an investment in these law graduates with the same risk the law graduates made with attending law school. That one business law class will not help them “hit the ground running” at your company. 

Seager said it is estimated that 3,000 out of 8,900 law firms in England and Wales will go out of business by 2012 due to the rise of transactional legal services offerings from big companies such as Tesco. Wow, I can only imagine the number of solo practicioners and mid-size firms that the economy will devour in the United States, especially with top firms laying off staff and associates. 

He said the introduction of Tesco legal services will appeal to a number of consumers because they already have a client relationship with Tesco. He said that clients will be able to get the same transaction from Tesco for half the price offered by some law firms, so solicitors need to focus on building their client relationships to survive. I see, Tesco and other similar business firms would like to absorb the unemployed attorneys, increase their business production, increase their competition with law firms with the hopes of obliterating the legal industry. Makes sense. 

Seager said that IFAs can help solicitor firms to do this by moving away from a purely transactional business model. He said: “There is going to be huge consolidation in the legal sector and IFAs should be looking to make the most of that. I wouldn’t say consolidation, moreso an industry takeover. 

“IFAs are in a good position to partner up with solicitors and offer consultancy on how to change their business model so they retain more clients.”   Seager said that solicitors have 20 per cent client retention on average. 

People are either waiting for or trying to take advantage of the collapsing legal industry, but that’s the point—it is collapsing. Save yourself.

Batting 10,000

You the readers have reached over the 10,000 mark for number of hits. Although this blog is new, I am going to assume that there are so many people who are hearing the message or experiencing the aftermath of the law school industry. Hopefully, the message continues to spread. Say no to law school and yes to your sanity…

Another Law School to Open = Another tragedy

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Good day, today we report that Boise, Idaho will open it’s first new law school in 2011. Because what’s better than opening a law school,  getting more Americans in excessive debt with the high risk of little or no ability to repay it and have a decent standard of living or quality of life.  Boise’s first law school set to open in 2011 | Idaho News from KTVB.COM | Boise news, Idaho weather, sports, traffic & events | Home June 23, 2010.

BOISE — A new law school coming to the heart of downtown Boise had its official ground breaking Tuesday…Some people say the law school is long overdue. Potential deans and law professors waiting to make a financial free fall from the estimated costs of the school via subsidized student loans, contracts and endowments.

I think the picture in the news caption is so fitting. A man or woman burying his future by going to law school. You will be looked upon as dirt by elitist and family members who wonder why you won’t be working as apologists for the legal industry continue to shovel false hope down the publics throat. Now that’s what I call symbolism.

“The new dean of the law school, Cathy Silak says after surveying more than 40 sites, the Portland-based Lutheran univerity decided to open their first campus in downtown Boise.” Not sure why one university in one state is opening a law school in another. Maybe this will start the true trend of McLaw; franchising, where one university opens multiple law schools in different states for the cheapest real estate and biggest financial returns. Maybe I shouldn’t give the proponents of the legal industry any more ideas.

Mayor Bieter says this addition to downtown will not only be advantageous to potential law students, but to the community as a whole.  In fact Mayor Bieter says Boise is one of the largest urban areas without a law school. It does not necessarily mean that it should have a law school; but why not jump into the big business of lawyer making. One can just read the cookie-cutter recipe posted before the legal industry conveyer belt:  unwitting 0Ls, application fee, LSAT fee, tuition (with increase), Sallie Mae helping to deliver them into the hands of financial aid officers, law professors, law school deans and the real world of unemployment. Here’s the U.S. economic stress map, look at the entire state of Idaho, though Boise which is located in Ada County had an 8.5% overall rating [Associated Press Interactive: AP Economic Stress Index], imagine in three years additional concentration of lawyers will likely do to the unemployment rate, state budget and welfare system.

“It just bolsters everything around it. its added jobs, more economic activity and its a presence thats important to the future of our city.”  says Bieter. [sic] [emphasist mine] Yes, added jobs, but not for the law graduates who will leave the halls of this institution of higher education and actually contributed to the temporary economic boost in the local economy to begin with.

Concordia isn’t the only university with its sights set on Boise. The University of Idaho is also working on bringing part of it’s law school to the Treasure Valley. Wait, the State of Idaho does have a law school which plans to expand in Boise but the article makes it appear that The University of Idaho will simply open up something new there; see [College of Law in Boise] wonder if there was a bidding war or University of Idaho School of Law just didn’t have the Boise metropolitan area in its sight. So the mayor encourages the construction of a law school specifically in Boise, because the city didn’t have any, but now they’re going to have two, how about three or four, there’s no end to the madness. Here’s the College of Law in Boise justification:

 Lawyers serve the state in many ways including economic development. Idaho has a growing need for legal expertise to support a growing economy, the administration of criminal and civil justice, and the services needed by Idaho families. At the same time, legal education is changing due to globalization, specialization, rising demand for practice-ready graduates, and increased use of law degrees in business and other occupations. Law school is no longer simply a gateway to the practice of law. Yes, developing the local economy of the state and industry itself without the necessary financial benefit whose back the industry depends on. Rising demand? Maybe, for slave labor. Seriously, have they no idea of the oversaturation of the legal job market, none whatsoever? These are your job prospects: http://boise.craigslist.org/lgl/, notice most aren’t even advertising length of employment or what the actual pay the firm is offering.

 “The eight-year span (Fiscal Year 2009 to FY 2017) of this implementation plan and budget projection reflects a careful, conservative estimate of a realistically expeditious time frame for developing the academic program and the statewide student enrollment while maintaining our commitment to quality. After FY17, the stable level of student enrollment and the programmatic advantages of the two-location operation are expected to make the law school increasingly attractive and even more selective and competitive.” Our law school won’t have it together until 2017, meanwhile you will mortgage your lives while being our guinea pigs to see if our programs work out.

Now back to you.

Sallie Mae: Make Interest Payments While at University & Save!

Commerce Bank teams with Sallie Mae on new student loan product | Dollars & Sense June 22, 2010:

Commerce Bank teams with Sallie Mae on new student loan product This title looks a bit truthful, I see the usage of the word “product”, these corporations are trying to sell you something. With any product companies have advertising and marketing to induce a potential consumer to buy, but what is its value-to you-not them?!

Commerce Bank is offering the Smart Option Student Loan to help students pay off their college debt faster.Smart Option, which is provided through student loan lender Sallie Mae, allows students to make interest payments while in school. Because we know an average college student makes so much money that they can afford interest payments while enrolled full-time, providing for housing and shelter. Hmm, many obtain higher education to increase their salary potential, so what makes you think they can afford interest only payments, even though the principal is deferred? Maybe they can use some of the student loan money to pay interest, though it’s supposed to help pay for tuition, fees, books and what they need to survive while in school.

According to Commerce, a typical freshman can save more than 50 percent in interest charges over the life of the loan and it off in seven years after graduation instead of the standard 15-year term offered by other loan products. A typical freshman is 17-18 years old, where will they get this money? Their summer jobs paid minimum wage, please elaborate.

Students who enroll in the plan and make all their monthly payments by automatic debit may be eligible for a 0.25 percentage point rate reduction. In addition, students can take advantage of the Smart Reward program and earn 2 percent of their scheduled monthly payment as a reward in a Upromise account. Any percentage rate deduction is good, but what are the terms and conditions, like if they missed one payment does Sallie Mae terminate the entire program? With the latter 2% earned, I doubt the extent of benefit since the entire time inflation is rising and the student may not have been able to negotiate a fixed interest rate on the loan itself

The loan also allows customers to apply with a creditworthy co-signer, which can mean a better chance of approval and a lower rate. Students may also be eligible to apply to have the co-signer removed from the account after they graduate and make 12 consecutive loan repayments on time. We give you permission to get someone else in debt on your behalf, how gracisous of you. With many parents who have lost retirement accounts, receiving pink slips;  and wondering when they will be able to retire, why not add the high risk of their child’s student loan default. One should seriously consider whether he or she should really purchase this product; especially when college graduates, let alone some professionals are unable to find jobs with degrees.

Law School Tuition Hikes, Economy Downturn, why are you still going?

 

On June 18, 2010, The Triangle Business Journal published: 

Even as salaries go flat, Triangle law schools continue hiking tuition – Triangle Business Journal

The authors smacks you in the face with facts in the first paragraph: “DURHAM – Despite the battering the legal industry has endured over the past couple of years – which included salary and job cuts at many firms around the country – local law students will face rising tuition costs yet again this fall.” Interesting, you failed to mentioned the number of lawyers who are UNEMPLOYED but seem to emphasize the big and mid size law firms reduced salaries. Maybe you aren’t so forthright.

The law schools at UNC-Chapel Hill, Duke University, Campbell University and N.C. Central University all plan to increase tuition rates, and the total cost of earning a law degree now approaches or exceeds six figures for many students.” Riiiigghhhtt, now it approaches six figures, well most law students unless on scholarship, trust fund or help from some anonymous source are already burdened with this amount of student loans. Notice that despite the fact most law graduates aren’t finding jobs, saddled with tremendous non-dischargable debt, these law schools are still raising tuition. How can you justify it? Let’s put some theories out: 1) to deter the poorer Americans to not go to law school, based on the statistics of the current economy I think it’s reasonable to say that those will primarily be minorities. 2) these schools may have been poorly operated or lost endowments, funds in these Madoff & co. ponzi schemes like Harvard did 3) They know that there are still plenty of delusional 0Ls who think they will beat these odds and somehow by obtaining a Juris Doctor their lives will be complete, they just need to work hard to get on the other side. There is a saying: “Work harder, not smarter.” Allowing oneself to be under the tutelage of adults who are disgruntled with their lives and can have a major impact on your future life (standard of living, income, sanity) with just the stroke of the red pen versus taking heed to all of these warnings that law school is not worth the investment. With the changes in the economy, business models within the legal industry it is likely never to return to its once ‘glorious’ state.

“Students are faced with a very tough question,” says Boger, the dean of UNC-Chapel Hill’s law school. “I think there’s a whole lot of recalculation going on.”

“The old math was pretty simple: Law school was expensive, but debt incurred could be paid off in a reasonable amount of time because starting salaries at big-time law firms paid so handsomely. Then came the economic downturn, which belted law firms’ customers and, in turn, the firms themselves. That caused many big law firms to hire fewer new lawyers and pay the ones they did hire less than before.”

You see members of the legal industry who would benefit from you attending law school are even telling prospective students that you better reconsider your decision to go to law school. While others still attempt to justify the costs of such a prestigious profession:

“Bill Hoye, the university’s associate dean of admissions and student affairs, says Duke’s tuition is comparable to the top law schools in the country. He adds that law school is an investment that can pay off over a 40-plus-year career – and there is still a large earnings potential at big firms. Many of the area’s largest law firms still pay starting salaries well in excess of $100,000.”

Let’s see, the average lawyer likely not to continue practicing law after 6-10 years from what I have witnessed or is working to transition into another career. The fact that this dean “guesses” that it is possible for the ‘investment’ to pay in 40 years =nothing but a gamble to assume that the legal industry will recover from these fundamental changes that have already happened, that what you earn as a starting salary will be that of a BigLaw associate–which is reserved for the few–at least it used to be as now Harvard and Yale law graduates are unable to secure employment; even should one be able to earn a particular salary, it doesn’t last forever: mergers, layoffs, downsizing, changes in business models in the past only 10 years have devastated so many lawyers. One can only image what will happen in another 40 years!

Hoye thinks that what Duke offers students in terms of top-notch faculty and programs is worth the cost. “The quality of education is just outstanding,” says Hoye, who adds that financial aid at Duke’s law school also will rise by at least 5.5 percent this year. I’M SURE HE DOES.

“Duke projects it will have 744 full-time law students next year, while UNC will have about 800. Campbell plans to have about 450 total law students.” I’m not sure if they are referring to a new set of incoming class or whether if they include next year’s incoming class that will be their total number of students matriculating at the time. Either way it’s sad.

Wow, Grade Inflation: Article in the New York Times

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Today the New York Times posted: In Law Schools, Grades Go Up, Just Like That – NYTimes.com .Most of us already concluded that oversaturation of the legal market and lack of practical skills caused most lawyers to talk the plank into the sea of unemployment.

“In the last two years, at least 10 law schools have deliberately changed their grading systems to make them more lenient. These include law schools like New York University and Georgetown, as well as Golden Gate University and Tulane University, which just announced the change this month. Some recruiters at law firms keep track of these changes and consider them when interviewing, and some do not.”

This article focuses on grade inflation, with the implication that such practices will increase the chance for attorneys to get jobs. What the author fails to realize is that there aren’t any legal jobs to get moreso nowadays.

“Law schools seem to view higher grades as one way to rescue their students from the tough economic climate — and perhaps more to the point, to protect their own reputations and rankings. Once able to practically guarantee gainful employment to thousands of students every year, the schools are now fielding complaints from more and more unemployed graduates, frequently drowning in student debt.”

One could easily argue that students are getting grades they do not deserve, yet students who are forced into the bottom portion of the curve because of mandatory grading may benefit.

“Unlike undergraduate grading, which has drifted northward over the years because most undergraduate campuses do not strictly regulate the schoolwide distribution of As and Bs, law schools have long employed clean, crisp, bell-shaped grading curves. Many law schools even use computers to mathematically determine cutoffs between a B+ and a B, based on exam points.” I doubt somewhat the characterization the author makes of most undergraduate schools, like during this entire time the law school’s manner of operating has a clear history of legitimacy.

I do remember reading a year ago a high school or elementary schoolteacher who left primary education altogether because he was distraught that by school policy he HAD TO distribute a certain number of grades ranging from A’s to D’s for each school year. He stated there were some were good in certain areas like testing and others who were good in other areas, solving problems but not under pressure (I guess like schoolwork or homework) but I’m sure you can assume who received what grades. This teacher had a soul. Based on what I witnessed in law school, especially your first year, where you’re assigned tenured professors who have lost their minds, that many of them enjoy taking their life’s disappointments on unsuspecting students (pretty much all 1Ls). I’ve even met a Ph.D. professor who stated she enjoyed final exam and final grading because she could give whoever she didn’t like in her class whatever grade she wanted.

“All of the moves can create a vicious cycle like that seen in chief executive pay: if every school in the bottom half of the distribution raises its marks to enter the top half of the distribution, or even just to become average, the average creeps up. This puts pressure on schools to keep raising their grades further.” Wonder if it does any thing for their rankings too…”Employers say they also press law schools for rankings, or some indication of G.P.A.’s for the top echelon of the class. And if the school will not release that information — many do not — other accolades like honors and law journal participation provide clues to a student’s relative rank.” Interesting…

Anyone remember the scene from the Titanic when the ship was actually sinking and the violins kept playing either to comfort those on board or for those who wanted to enjoy themselves until the vary end? These schools are doing everything BUT closing down to keep the cycle going. These factors contribute greatly to the future generations, standard of living, mental and social health, but grading systems themselves do not appear to be regulated at all.

Next, the article reads: “Others, like Duke and the University of Texas at Austin, offer stipends for students to take unpaid public interest internships. Southern Methodist University’s Dedman School of Law even recently began paying profit-making law firms to hire its students.” Just as many 0Ls are desparately seeking ways to attend law schools, these law schools are getting so desparate to have their prior students get some work. This is such a bad cycle. It’s like no one is dealing with reality. Cycle of law school addiction?

“But the tactic getting the most attention — and the most controversy — is the sudden, deliberate and dubiously effective grade inflation, which had begun even before the legal job market softened.”

“If somebody’s paying $150,000 for a law school degree, you don’t want to call them a loser at the end,” says Stuart Rojstaczer, a former geophysics professor at Duke who now studies grade inflation. “So you artificially call every student a success.”

But wait, IVY League law schools are doing it too:Harvard and Stanford, two of the top-ranked law schools, recently eliminated traditional grading altogether. Like Yale and the University of California, Berkeley, they now use a modified pass/fail system, reducing the pressure that law schools are notorious for. This new grading system also makes it harder for employers to distinguish the wheat from the chaff, which means more students can get a shot at a competitive interview.”

This is unfortunate because as more of the lower tier law schools opened, more students will attend for some strange reason. Older generations (I mean people who grew up in the 80’s) did not have access to law school rankings and U.S. News and the internet. Career centers or counselors steered them towards state institutions regardless of rankings. Those that could’ve made it into Top Tier then would’ve had better chances of carving a real career in the legal industry before this devastating shift of “it will never be the same” occurred. Now, those who were intelligent enough and those who weren’t but attended the same TTT law school will be forever lumped in the mediocrity with rice paper thin prestige. Those who knew some of the game and went to top tier but not that much better will be given the written stamp of approval, you may pass “Go” but still on the other side of the door are the blank faces whose stares read “Yeah, they got me too.” So welcome one and all, at this point it does not make a difference which law school you attended, only in the heads of those promoting this practice and the all too eager law graduate who continues to delude him or herself into thinking that attending law school was a wise decision.

Law School Tuition: USA Today Article: Investing won’t get you to law school; saving will

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June 21, 2010 USA Today: Investing won’t get you to law school; saving will – USATODAY.com. The author providing the advice is very frank, even if you INVESTED the $2500, there’s no reasonable way that the return on the stock investment will cover the costs of attending law schools. A gamble won’t cover a different gamble! Here’s the piece:

Q: What can I invest in that will turn my $2,500 savings into enough to pay for law school? A: We are often told that the stock market can richly reward patient investors. And that is true. But what you’re asking goes beyond what can be reasonably expected. You mean that the average person starting law school cannot afford to pay for it by investing or saving whatever money they have? Doesn’t that just force them into Sallie Mae’s prickly embrace? Oh, they just can decide NOT to go as an option as well.

Let me explain. You’re probably hoping I’ll rattle off a few amazing stocks that will rocket in value to turn your $2,500 into law school money. The odds of picking a couple of stocks that will do that are tiny.

Let’s first consider how much money you’ll need. The median tuition for one year of law school in 2008 was $16,836, according to the American Bar Association. And tuition has been rising about 9% a year.

That means if you enrolled in 2010, the price of the first year of law school would likely be $20,003. And that’s just the first year three. Your total tab would be somewhere around $65,572.

So, you’re hoping to turn $2,500 into $65,572. Let’s assume you’d want to have this happen in two years. For this incredible increase in wealth to occur, you would need a stock that rises 2,522%, or 412% on average for two straight years.

The reality: Stocks, on average, return about 10% a year. And lately, stocks haven’t even been doing that. Stocks aren’t the only thing not returning an investment.

If there were any stocks that could generate the kind of return you are looking for, they would come with such gut-wrenching risk you could also completely decimate your original $2,500 investment in the process. Like attending law school in the first place.

Don’t just take my word for it. Parallel comment: just read the blogs.

Over the past two years, not a single stock in the Standard & Poor’s 1500 index, which includes stocks of all sizes, rose 2,500% or more, according to Standard & Poor’s Capital IQ. In fact, not a single stock rose more than 2,000%. Over the past ten years law school tuition rose, while law graduates unemployment increased, so the actual product decreased in intrinsic value though it is still being sold based on its tradition and prestige.

To be more precise, the best-performing stock rose less than 400% the past two years. So even if you picked the best stock in the S&P 1500 universe, not an easy feat, your $2,500 would have been worth $12,500, a far cry from what you need to pay for law school.   Parallel comment: Not all law schools are the same, should you even choose to attend the best, what you invest will still not get you to the goal of being employed and paying off those student loans.

What’s the moral of this story? Don’t look to the stock market to pay for your law school, especially when you’re starting with $2,500. You’ll need to invest, yes, but more important, you’ll need to save more, and consider grants, scholarships and other financial aid. [emphasis mine].People are willing to do any thing for a chance to attend law school, instead this financial advisor states that the only way the writer will be able to afford to attend law school is through financial aid=student loans=Sallie Mae; who is not as benevolent as she sounds.

Smart investing can accomplish great things, but what you’re looking for goes beyond what an investor could hope for in his or her wildest dreams. In other words, it’s neither wise to invest in a bad stock market or that other type of investment “law school.”

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